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Tsipras asks euro region for a new bailout as meltdown looms

Greece asked for a new bailout program from the euro region hours before its existing aid agreement expires and pushes the nation toward a financial precipice.

PHOTO: BLOOMBERG

[OTTAWA] Greece asked for a new bailout program from the euro region hours before its existing aid agreement expires and pushes the nation toward a financial precipice.

Prime Minister Alexis Tsipras made the request to the European Stability Mechanism to cover all the country's financial needs for the next two years, along with a debt- restructuring plan, his office said. Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of euro-region counterparts that had been in negotiations with Greece, said it will be considered later on Tuesday.

On the second day of capital controls that shut the country's banks, the government said it will continue negotiations seeking a "viable agreement" within the euro area. The proposal didn't include any of the economic-reform measures European negotiators had sought for months.

The move is the latest attempt by Greece to force the hand of its creditors after five months of talks dramatically broke down over the weekend. Mr Tsipras called a surprise referendum for July 5 on the latest austerity measures, which are tied to the release of more rescue money. European leaders said it's ultimately a vote on whether to stay in the euro.

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Mr Tsipras's request for what would be Greece's third bailout in a little over five years, "strikes me as just another brinkmanship tactic," said Ben May, lead eurozone economist at Oxford Economics in London.

"It could arguably be the starting point for bringing Greece back from the brink, but it's going to be a pretty bumpy ride for sure."

The euro pared its decline after the news of Greece's request, and traded 0.6 per cent weaker at $1.1182 as of 3:25 pm in London. It was as low as $1.1134.

Greece's government said it will miss a payment to the International Monetary Fund on Tuesday and the country is preparing to exit the protection of Europe's bailout regime at midnight.

A spokesman for German Chancellor Angela Merkel pointed to her comments earlier today, before the Greek request was made, noting that the current bailout expires tonight and there were no "relevant indications" otherwise.

More Twists The latest twists are unlikely to be the last.

German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece would stay in the euro for the time being even if Greek voters reject austerity in the referendum, according to three people present.

"This week is going to be very psychologically tense, very emotional," said Othon Anastasakis, a professor of European politics at the University of Oxford. "There are going to be various arguments from both sides."